What has SBIN’s performance been like?Performance can be measured based on factors such as earnings and total shareholder return (TSR). I believe earnings is a cleaner proxy, since many factors can impact share price, and therefore, TSR. Recently, SBIN released an earnings of IN₨80.43M , which is a rather significant decline from its prior year’s profit (excluding extraordinary items) of IN₨44.79B. However, SBIN has strived to maintain a good track record of profitability, given its average EPS of IN₨17.59 over the past couple of years. In the situation of diminishing earnings, the company may be facing a period of reinvestment and growth, or it can be a sign of some headwind. Regardless, CEO compensation should be reflective of the current condition of the business. In the latest financial statments, Gupta’s total compensation increased over two-fold, to IN₨2.62M , but off a low base. Although I couldn’t find information on the composition of Gupta’s pay, if some portion were non-cash items such as stocks and options, then fluxes in SBIN’s share price can impact the real level of what the CEO actually takes home at the end of the day.
Is SBIN’s CEO overpaid relative to the market?
Even though one size does not fit all, as remuneration should be tailored to the specific company and market, we can gauge a high-level thresold to see if SBIN deviates substantially from its peers. This exercise helps investors ask the right question about Gupta’s incentive alignment. Normally, a BSE or NSEI large-cap is worth around ₹879 Arab, generates earnings of ₹36 Arab and remunerates its CEO at roughly ₹7 Crore per annum. Considering the size of SBIN in terms of market cap, as well as its performance, using earnings as a proxy, it seems that Gupta is paid lower than the average BSE and NSEI large-cap CEO.
In the upcoming year’s AGM, shareholders should think about whether another increase in CEO pay is justified, should the board propose an executive pay raise. Will this raise take Gupta’s pay beyond the bound of reasonableness, or will it help in retaining the talented executive? Being proactive in governance decisions is a key part to investing, and collectively, investors can make a big difference. If you have not done so already, I urge you to complete your research by taking a look at the following:
- 1. Governance: To find out more about SBIN’s governance, look through our infographic report of the company’s board and management.
- 2. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- 3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of SBIN? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!